In the first edition of our blog series on student loans in the UK, we discussed the responsibilities of different parties involved in the process. The Student Loan Company (SLC) is responsible for disbursing student loans and collecting repayments. For employed individuals, HMRC collects repayments through employers, while self-employed individuals repay through self-assessment.
The student or borrower needs to accurately share all information with SLC and understand their liabilities in repaying the student loan. However, when it comes to student loan repayment in the UK, there are some repayment plans that are applicable to students. If you want to know which student loan repayment plan is applicable to you, keep reading this blog till the end.
Which is Your Loans Repayment Plan?
The timing and plan of repaying your loan will depend on when you started your course.
The repayment amount will depend on the money you earn and not the loan amount. When you join a job, it is your responsibility to inform your employer about the repayment plan you have chosen.
- Repayment Plan 1 – Courses that started before 1st September 2012
In this student loan repayment plan, your repayment will start the following April after you finish or leave the course.
Before going further, here’s a table for your reference that highlights the repayment threshold in the UK:
| Schedule of Payment | Repayment Threshold (£) |
| Yearly | 24,990 |
| Monthly | 2,082 |
| Weekly | 480 |
Repayment starts only if your income is above the repayment threshold and is 9% of the income exceeding the threshold amount. If your income is not up to the threshold yet, your repayment will be on hold until income exceeds the threshold again.
Similarly, if your income changes, increases, or decreases, the repayment amount will accordingly change to accommodate the increase or decrease.
Once you start earning, you are free to make voluntary repayments at any time to the Student Loan Company.
Here’s the table for reference to understand the plan for repayment of student loans:
| Yearly income before tax (£) | Monthly income before tax (£) | Monthly payment approximately (£) |
| 24,990 | 2,082 | 0 |
| 26,000 | 2,166 | 7 |
| 28,000 | 2,333 | 22 |
| 30,000 | 2,500 | 37 |
| 35,000 | 2,916 | 75 |
- Repayment Plan 2 – Courses that started between 1st September 2012 and 31st July 2023
For full-time students, the repayment starts the following April after finishing or leaving the course.
For the HE Short Course Loan, students will start repaying the loan the following April after the course ends. Speak to your university or college for more information.
Part-time students start repaying the loan in April after either finishing or leaving the course. Repayment could start four years from the start of the course, even if the student is still studying. The repayment start time is decided based on whichever comes first.
Before going into further details, here’s a table of the repayment threshold in the UK for Repayment Plan 2:
| Schedule of Payment | Repayment Threshold (£) |
| Yearly | 27,295 |
| Monthly | 2,274 |
| Weekly | 524 |
Repayments begin only when the borrower’s income exceeds the minimum repayment threshold and are set at 9% of the income above this threshold. If your income does not meet the threshold, repayments will be on hold until your income exceeds it. Similarly, if your income changes, whether it increases or decreases, the repayment amount will adjust accordingly.
Once you start earning, you are free to make voluntary repayments at any time to the Student Loan Company.
Here’s the table for reference to understand the plan for repayment of student loans:
| Yearly income before tax (£) | Monthly income before tax (£) | Monthly payment approximately (£) |
| 27.296 | 2,274 | 0 |
| 28,000 | 2,333 | 5 |
| 29,500 | 2,458 | 16 |
| 31,000 | 2,583 | 27 |
| 33,000 | 2,750 | 42 |
- Repayment Plan for a Postgraduate Loan: a postgraduate Master’s course or a Doctoral course starting on/after 1st August 2016
For students completing their Master’s or doctoral courses, repayment will start the following April after leaving or finishing the course.
If you’re a doctoral student, you’ll start repaying your loan in the April following the completion or discontinuation of your course or in the April four years after your course begins (even if you’re still studying), whichever comes first.
The repayment threshold in this plan is as follows:
| Schedule of Payment | Repayment Threshold (£) |
| Yearly | 21,000 |
| Monthly | 1,750 |
| Weekly | 403 |
The repayments start only when the income of the borrower exceeds the minimum repayment threshold and is 6% of the income exceeding the threshold amount. If your income is not up to the threshold yet, your repayment will be on hold till the time your income exceeds the threshold again. Similarly, if your income changes, increases, or decreases, the repayment amount will accordingly change to accommodate the increase or decrease.
Once you start earning, you are free to make voluntary repayments at any time to the Student Loan Company.
Here’s the table for reference to understand the plan for repayment of student loans:
| Yearly income before tax (£) | Monthly income before tax (£) | Monthly payment approximately (£) |
| 21,000 | 1,750 | 0 |
| 22,000 | 1,833 | 4 |
| 23,500 | 1,958 | 12 |
| 25,000 | 2,083 | 19 |
| 27,000 | 2.250 | 30 |
| 30,000 | 2,500 | 45 |
- Repayment Plan 5: An undergraduate or postgraduate course after 1st August 2023
This is a new repayment student loan plan. Your repayment will not start before April 2026, even if you leave the course midway. Also, the repayment starts only when you earn more than the threshold and will be 9% of the earnings above the threshold. If your income is lower than the threshold, repayment will start only once the income is over the threshold. Voluntary repayments can be done at any time.
With a change in your income, the repayment amount will also accordingly change.
The threshold for the 2026-27 tax year is as follows –
| Schedule of Payment | Repayment Threshold (£) |
| Yearly | 25,000 |
| Monthly | 2,083 |
| Weekly | 480 |
Here’s the table for reference to understand the plan for repayment of student loans:
| Yearly income before tax (£) | Monthly income before tax (£) | Monthly payment approximately (£) |
| 25,000 | 2,083 | 0 |
| 28,000 | 2.333 | 22 |
| 29,500 | 2,458 | 33 |
| 31,000 | 2,583 | 45 |
| 33,000 | 2,750 | 60 |
- Repayment when your income is less than the threshold
Borrowers earning less than the repayment threshold will start their repayment of student loans once their monthly or weekly income goes beyond the threshold limit.
For instance, If you get a bonus or overtime compensation, your income can go above the threshold in that week/month. However, you can get a refund when the tax year comes to an end only if the annual income is less than the annual repayment threshold against your loan. This refund happens only when the SLC is informed.
- Making voluntary repayments
Voluntary repayments can be done at any time to the SLC. The voluntary repayments will not affect the amount you repay via the tax system. Your employer will deduct the usual amount. In this case, a refund is not possible till the loan is completely paid off and repaid more than required.
- Students with more than one plan type
In case of more than one loan, you will need to repay both simultaneously when your income is more than the threshold. For instance –
Plan 1 and Plan 2 loans: The repayment will be for Plan 1 if you are earning between £2,082 and £2,274. When it goes over £2,274, the repayment will cover both Plan 1 and 2.
Plan 2 and Postgraduate Loan: You will repay your Postgraduate Loan if you earn between £1,750 and £2,274. When the monthly income is above £2,274, repayment against the Plan 2 loan will start. 9% of your monthly income above £2,274 goes towards your Plan 2 loan and 6% of the income above £1,750 goes towards paying your Postgraduate Loan.
- Interest rates on student loan
Interest is charged on your student loan in the UK. The interest rates on student loans are charged daily. The interest is compounded to the balance each month. The interest rate on your repayment loan.
The interest rates on student loans depend on the Retail Price Index (RPI). RPI is the measure of inflation or the cost of living in the country.
Repayment plan 1
The interest rate is either the RPI of last year’s March or 1% above the highest Bank Base Rate, whichever is lower. It is established on 1st September every year. It can change during the year too.
Repayment plan 2
Refer to the table below:
| Your circumstances | Interest Rate |
| Full-time students – when you study till 6th April after finishing the course or leave the course | RPI + 3% (usually) |
| Part-time students – when you study till the 6th of April after finishing the course or leave the course, or, the 6th of April four years later than your course’s starting date, whichever is first | RPI + 3% (usually) |
| After finishing your course, the following April -l the loan will be completely repaid | Interest rates on student loans are based on the earnings:Less than £27,295: Interest is RPI.Between £27,296 and £49,130 is RPI + 3%.Over £49,130 is RPI + 3%. |
| In case students are not in touch with SLC or do not inform them of changes in personal details | RPI + 3%, irrespective of your income, till the time you contact SLC. |
Postgraduate Loans
Interest is RPI+3% and charged from the first payment made till the loan is either repaid or canceled.
Repayment plan 5
The interest rate is usually the RPI.
The Department of Education monitors student loan interest rates, reviews them monthly, and makes changes so that students are not disadvantaged. Learn how to repay student loans in our next blog.
More About The Importance of Paying off a Student Loan.
Conclusion
Understanding the intricacies of student loan repayment plans in the UK is crucial for managing your financial obligations effectively. Whether you are a recent graduate or a doctoral student, knowing when and how to repay your loan can help avoid unnecessary stress and ensure compliance.
If you need personalised assistance or professional advice on managing your student loan repayments, consider reaching out to experts. Companies like TaxCan and Cangaf Ltd. specialize in providing tailored financial guidance. You can seek their help to navigate the complexities of student loan repayment.
Contact them today to ensure you’re on the right track with your financial future.
